EVENT: "Insurance in Azerbaijan: Trends & Opportunities" Conference took place on 28 June in Baku

28 June 2019 — Mihaela CIRCU
One of the most important insurance events within the Caucasus region - the "Insurance in Azerbaijan: Trends & Opportunities" Conference took place today, 28 June 2019, in the capital city of Azerbaijan - Baku.

The event brought together more than 200 insurance specialists from over 20 countries, to discuss the latest trends in the region, aiming to shed light on a means of boosting Caucasus insurance market development, especially on the Azeri one. This year's event offered prestigious keynote speakers, networking opportunities and thought provoking, inspiring discussions panels.

Some of the event speakers included:

  • Gepa JANSEN-KLAUS, Senior Client Manager, Vicepresident Russia & CIS, Swiss Re
  • Alla MIGASHKO, Senior Reinsurance broker, Aon Benfield, Czech Republic
  • Fuad KULIYEV, Chairman of the Supervisory Board, AZ Re
  • Michael THEILMEIER, Re/insurance Consultant, Germany
  • Mehmet GOKHAN AY, Assistant Manager, Insurance Arbitration Commission, Turkey
  • Seymur MIRZAYEV, Project manager, Compulsory Insurance Bureau, Azerbaijan
  • Menekse UCAROGLU, General Manager, IUC - Istanbul Underwriting Center
  • Berk BACAKOGLU, Chief Information Officer, SBM - Insurance Information and Monitoring Center
  • Vasilis KATSIPIS, General Manager, Market Development, A.M. Best
  • Catherine HOCK, Vice-President, International Relations the International Cooperative and Mutual Insurance Federation (ICMIF), UK
  • Alexander DENTON, Partnerships Development Manager - Europe, Middle-East & Africa, AXA - Global Healthcare
  • Asif JOHN, Chair of Data Science Collaboration, Institute and Faculty of Actuaries, London; Founder & CEO, AMJ Global Solutions, ARGenesis, UK
  • Tudor GALOS, Senior Consultant, TUDOR Galos Consulting, Romania
  • Dashdamir NIFTALIYEV, Acting Managing Director, AUDATEX Azerbaijan
  • Firdovsi AGHASHIRINOV, Head of non-life insurance Supervision Unit, Financial Market Supervisory Authority, Azerbaijan
  • Ali BAYRAMOV, Founder, BUTA Insurance & Reinsurance Broker
  • Daniela GHETU, Editorial Director, XPRIMM Publications

The conference was co-organized by XPRIMM, Azerbaijan Insurers Association (AIA) and the Compulsory Insurance Bureau of Azerbaijan (CIB), with the official support of the Financial Market Supervisory Authority of Azerbaijan (FIMSA).

Below you can find the main statements from the event.


Head of non-life insurance Supervision Unit, Financial Market Supervisory Authority, Azerbaijan

  • FIMSA has put a lot of effort and has done a lot of work in development of insurance. At the moment, this area is far from its potential, but taking into considerations the measures and the projects of FIMSA, we are confident that we will bridge the gap.
  • At the moment, insurance sector represents 0.95% of the GDP, generally speaking and 1.56% of the non-oil GDP, while the insurance density is of 73 AZN (about 36.5 EUR).
  • FIMSA has implemented some measures with the scope of improving the insurance mechanism - implementation of IFRS 17, implementation and introduction of mutual insurance, the new incident management system, part of our digitalization program.
  • At the same time, we are involved in different projects of financial education, as also resulted from the memorandum signed with the Ministry of Education. We are promoting insurance in schools, but also to small businesses.
  • Regarding the foreign investors, we have some gaps that should be overcome in order to support the easy process, but we are aware that there is a enough capacity on the market.
  • We are confident the new lines of business will help enhance the development of the market.

Assistant Manager, Insurance Arbitration Commission, Turkey

  • Arbitration is the resolution of a dispute by the arbitrator outside the general jurisdiction, being the alternative (additional) dispute resolution methods like Ombudsman or Mediation.
  • Turkish example: Arbitration System is works on the following legal Basis: Insurance Law. No.5684 Art. 30/1 - «In order to settle the disputes arising from the insurance contract between the policy holder or people benefiting from the insurance contract on the one side and the party undertaking the risk on the other side... an Insurance Arbitration Commission shall be established within the Association.»
  • Reason is related to the fact that the litigation is costly for consumers who may not have sufficient economic resources. It may take many years to get a final outcome in courts, due to too burdensome procedures in courts. At the same time, the risk of paying high litigation costs if final outcome is not in favour of consumer.
  • The aim of the system is to resolve insurance disputes by a simple, and less costly procedure in a shorter period, with low application fees, using the opportunity to apply by post, with certain time limits set by the law, using independent, impartial and expert insurance arbitrators.

Catherine HOCK,
Vice-President, International Relations the International Cooperative and Mutual Insurance Federation (ICMIF), UK

  • There are 40 mutual type organisations in Europe. These are private entities, falling under private law, not controlled by government representatives or funded by public subsidies. They are subject to democratic governance, i.e. each member has one vote.
  • The mutuals apply principle of solidarity among members and allows free entry and exit of everyone who fulfils the conditions as in the Statutes of the organisation. As the members are also the owners/supervisors of the organisation, profits are used for the benefit of members.
  • Concerning the number of (founding) members, there is a large variety of rules concerning the minimum needed to establish a mutual. In many countries, there is no exact indication of the initial capital. Complying with the capital requirements for an insurance licence is considered a barrier for establishing new mutuals. There are however instruments available: establish a fund to kick-start mutuals in the form of subordinated loans or guarantee capital or the set-up of a discretionary mutuals.
  • Concerning taxation, for a limited number of mutuals operating in markets subject to free competition tax benefits exist derived from the association statute.
  • The representation of members can be designed in two ways, either direct, or through delegates. The One-Person, One-Vote Principle prevails.
  • The general rule is that mutuals do not have shares. The possibility of allowing external investors is pivotal for overcoming capital barriers for establishing new mutuals.
  • Upon winding up, in total, 6 out of 38 legal forms existing in the European Union have a legal system which assures that the remaining assets are distributed to similar (not-for-profit) types of organisations.
  • Mutual and cooperative insurers in 2017 collectively represents 8.9 trillion USD in assets and 922 million of policy holders.

General Manager, Market Development, A.M. Best, United Arab Emirates

  • As in most emerging markets, increased economic activity is the main driver for growth in non-life business, still growing faster than GDP remains a challenge. Accelerating that growth further and reducing the protection gap is a challenging task.
  • Compulsory insurances are a way forward. The introduction of agricultural insurance will add new growth impetus. This together with the introduction of compulsory insurance scheme are likely to drive greater insurance awareness.
  • Ageing population drives demand for life and retirement products, and the today's emerging markets are to be hardest impacted. At the same time, state finances unlikely to be able to cover increased expense.
  • In many markets there is a lack of awareness and regulatory / insurance preparedness.
  • Potential for growth of healthcare business is highlighted by the great proportion of out-of-pocket payments in emerging markets.
  • The drive for private insurance is going to be accelerated by rises in income levels, greater incentives from Governments and increasingly ageing population. Profitability could suffer due to increased competitive pressures.
  • Profitability of health business is marginal at best and performance of business in early years is mostly due to lack of insured information.
  • Longer term profitability is dependent on tariff pricing (if applicable), medical inflation and misuse and fraud.
  • At the same time, mandatory health insurance scheme will drive insurance awareness and could have greater impact on the insurance market than all recent regulatory actions.
  • Economic growth and changing demographics almost guarantee growth of the market will outpace that of mature markets.

Senior Client Manager, Vicepresident Russia & CIS, Swiss Re

  • Natural catastrophe risks are largely uninsured. The global natural catastrophe protection gap totalled 193 billion USD in 2017.
  • Premium volume for mandatory insurance of immovable Property went up by 30% in 2018 but still, in Azerbaijan, a country with a major Earthquake exposure - only ca. 4% of the overall insurance premium volume is dedicated to immovable property. In the neighbouring countries this figure is at ca. 20%.
  • Parametric insurance is a type of insurance that does settle on a pre-agreed, simple measure (the "parameter", or "index"). The payout depends upon the occurrence of a triggering event, regardless of the actual loss. At the same time, an independent third party (e.g. USGS for EQ) determines the intensity of the event and hence the impact of the claim. The insured purchases a maximum payout cover from the insurer. The premium depends on the chosen limit as well as exposure of the insured. Even though large efforts are made to avoid it, the payout on a parametric product is unlikely to be exactly equal to the financial loss of an insured, the difference is known as "basis risk".

General Manager, IUC - Istanbul Underwriting Center

  • Compulsory Earthquake Insurance is an assurance provided by the Turkish state, providing assurance for dwellings against earthquakes and disasters, such as fires, explosions, landslides and tsunami caused by earthquakes.
  • Turkish Catastrophe Insurance Pool (TCIP, or DASK) calculates the premiums according to the building style, gross surface area of the dwelling and the earthquake risk level of its region. The insurance scheme offers discounts for collective applications and renewals.
  • TCIP activity in brief:
    • sustained low prices, with an average of USD 23 per policy;
    • improved penetration, from 4% to an average of 51% in Turkey, with about 9.1 million properties insured across the country;
    • TCIP portfolio is mainly formed by policies for reinforced concrete buildings (97% portfolio share), with 1-4 floors (53% share) and a flat size between 76-100 square meters (30% share);
    • strong reserves, amounting to USD 1.5 billion;
    • increased public awareness with over 90% brand and product recognition;
    • release on national budget, about USD 4 billion claim payment capacity;
    • less than 2% operational cost;

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